10 ways to save money while taking a home loan

Home loans, especially when you are in cash crunch, are a safe option at your disposal to buy a home. However, you should always look at the features of home loan and check details before choosing a specific home loan.  Here are 10 important tips that can help you save money while taking a home loan.

1)  Go for low interest: Low interest rates can make a huge difference in your EMIs. During festival seasons, several banks offer home loans at discounted interest rates, making it the right time to go for a home loan.

2)  Floating rate over fixed: Your monthly EMIs would be higher if you go for fixed interest rates as they would be offering very high interest rates. Always go for floating rate, except when the interest rates are exorbitantly high in the market.

3)  Interest rates trend: Keep a track of interest rates trend when you have decided to take the home loan. If the interest rates have drastically increased within a short period, then you may need to reconsider your decision. Your financial efficiency may be hampered as abnormal market conditions can increase your future EMI.

4) Processing fee: Generally banks or financial institutions charge loan processing fee up to 1% of the home loan they disburse. Search for the bank which charges low processing charges or which does not charge any processing charges. Waivers can be availed at banks where salary/business income amount is credited.

5) Increase your down payment: Generally you need to pay 10% to 15% of the home loan amount as down payment. Banks or financial institution offers 85% to 90% of the total cost as home loan. If you can increase the down payment, it would save the interest to be paid in the future.

6) Pre-payment penalty: With recent guidelines from RBI, a bank or financial institution is not supposed to charge the pre-payment penalty. So, you can make any partial payment after taking the home loan.

7) Go through the home loan document before signing: You should always read the terms and conditions of the bank or financial institution before signing the document. Carefully read through ‘force majeure’ and reset clause on fixed rates.

8) Make pre-payment: Whenever you have some surplus amount, try to make the pre-payment for the home loan. It will bring down your debt burden considerably.

9) Compare loan transfer charges: If you are planning to transfer the home loan from one bank to another bank or financial institution, compare the transfer charges among the banks or financial institution before taking the decision.

10) Top-up home loan: If you are going for Top-up loans on your home loan, check the additional charges you need to pay to get the loan processed. There may be hidden charges once the loan is disbursed to you.